Option data and modeling BSM implied volatility
This contribution to the Handbook of Computational Finance, Springer-Verlag, gives an overview on modeling implied volatility data. After introducing the concept of Black-Scholes-Merton implied volatility (IV), the empirical stylized facts of IV data are reviewed. We then discuss recent results on IV surface dynamics and the computational aspects of IV. The main focus is on various parametric, semi- and nonparametric modeling strategies for IV data, including ones which respect no-arbitrage bounds.
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| Length: | 30 pages |
| Date of creation: | Dec 2010 |
| Date of revision: | |
| Handle: | RePEc:usg:dp2010:2010-32 |
| Contact details of provider: | Postal: Dufourstrasse 50, CH - 9000 St.Gallen Phone: +41 71 224 23 25 Fax: +41 71 224 31 35 Web page: http://www.seps.unisg.ch/ Email: More information through EDIRC
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References listed on IDEAS
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- Corrado, Charles J. & Miller, Thomas Jr., 1996. "A note on a simple, accurate formula to compute implied standard deviations," Journal of Banking & Finance, Elsevier, vol. 20(3), pages 595-603, April.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
- Bernard Dumas & Jeff Fleming & Robert E. Whaley, 1998. "Implied Volatility Functions: Empirical Tests," Journal of Finance, American Finance Association, vol. 53(6), pages 2059-2106, December.
- Peter Carr & Liuren Wu, 2002.
"The Finite Moment Log Stable Process and Option Pricing,"
Finance
0207012, EconWPA.
- Peter Carr & Liuren Wu, 2003. "The Finite Moment Log Stable Process and Option Pricing," Journal of Finance, American Finance Association, vol. 58(2), pages 753-778, 04.
- Rama Cont & Jose da Fonseca, 2002. "Dynamics of implied volatility surfaces," Quantitative Finance, Taylor & Francis Journals, vol. 2(1), pages 45-60.
- Steven P. Feinstein, 1988. "A source of unbiased implied volatility forecasts," FRB Atlanta Working Paper 88-9, Federal Reserve Bank of Atlanta.
- M. Benko & M. Fengler & W. Härdle & M. Kopa, 2007. "On extracting information implied in options," Computational Statistics, Springer, vol. 22(4), pages 543-553, December.
- Mark Britten-Jones & Anthony Neuberger, 2000. "Option Prices, Implied Price Processes, and Stochastic Volatility," Journal of Finance, American Finance Association, vol. 55(2), pages 839-866, 04.
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